ABN 23 050 341 725
5 June 2014
PPSA Review Secretariat
Commercial and Administrative Law Branch
Attorney-General’s Department
3-5 National Circuit
BARTON ACT 2600
RE: STATUTORY REVIEW PPSA
The Self Storage Association of Australasia represents some 1200 individual self storage
businesses. Some of these are owned by corporate entities, many by individuals or
couples - colloquially known as ‘mum and dad’ style enterprises. A large proportion of
members we represent are small businesses. The Association has consolidated feedback
from its members on the impact of the PPSA and PPSR on their business, and makes
this submission of their behalf.
What is self storage? How is it unique?
In self storage, a person (known as a “storer”) stores their goods in a space licenced to
them by the facility operator. The facility operator does not have access to the storer’s
space, nor does the facility operator know what is being stored. One of the terms and
conditions of the storage agreement is that if the storer does not pay for storage fees, the
space may be forcefully accessed, the goods seized under contractual lien, and the goods
then sold. A strict process of notification is followed by Association members before the
space is accessed and the goods sold. It is not until the storer has defaulted on the
storage agreement and the facility operator has cut the lock and forced entry into the
space that the facility operator is able to ascertain what is being stored.
Unlike other businesses, self storage facility operators do not have the opportunity to
check whether items placed into storage have a PPSR listing against them until the storer
goes into default. In self storage, the storer may come and go with a variety of goods
throughout storage period, moving items into the space and out again without the
approval, verification or knowledge of the facility operator. For example, items moved
in at the start of the storage period may not be there a month later. On the other hand,
goods moved in months or years after the storage agreement was signed may in fact,
unbeknownst to the facility operator, have a PPSR interest registered against them.
At present, it is only on default and immediately prior to the facility operator seizing
possession of the goods under contractual lien, that the facility operator undertakes a
search to ascertain whether the goods in the space are subject to a PPSR listing. This is
because most storers do not default on their storage agreement, and hence it is not
relevant whether or not the goods in the space are covered by a PPSR registered interest.
Given an opportunity, most facility operators would not allow storers to store items
covered by a PPSR listing. This is because negotiating with PPSR security interest
holders is time consuming and complex, and the amount of the outstanding debt for
storage is usually relatively low. In short, having to negotiate over goods with a PPSR
listing is a lot of hassle for no reward.
“In other industries where goods are offered as security for credit or items
are left in the care of others (ie traditional warehousing) the business owner
has the ability to accept or reject the items after undertaking a search of the
PPSR. We [self storage facility operators] do not have the ability to make
such a decision as the relationship is ongoing and the items placed into
storage by the storer may vary from month to month or even day to day and
are unknown to us [the self storage facility operator]. The only person who
can access the storer’s space and the only person who knows what is in the
space is the storer themselves.”
The value of goods left in a defaulting storer’s space is generally very low. On average,
when a facility operator is forced to seize and sells a defaulting storer’s goods they make
less than a few hundred dollars from the sale. In the majority of instances, they do not
make enough to recover outstanding storage fees or the cost of enforcing the agreement
and selling the goods. This is despite the fact that the debt being enforced is usually well
under $1500. Speaking generally, both the debt being pursued and the value of goods in
self storage are both of low commercial value.
What members currently do – a disproportionate administrative burden and cost
relative to benefit
Members of the Association undertake a search of the PPSR for each and every storer
who defaults. In more than 95% of instances where a search is done, there is no security
interest listing against the storer. In the event that there is a registered interest, more
often than not the goods listed are not in the space.
“I have only ever had one out of hundreds of PPSR checks that has come up
with anything. The customer worked as a Stone Mason and it was for
equipment used to cut the stone. The goods in the unit were clothes and
personal items so they were not affected.”
And
“Very few searches have resulted in identifying anyone with an interest in
the property which leads me to believe that not many people are registering
their interest.”
Although the cost of undertaking the search can be added to the debt owed by the storer,
and hence in theory may be recouped through the sale of the defaulting storer’s goods,
most default sales of goods recoup so little funds that the ability to recover the search
cost is a theoretical benefit only.
More clarity needed around transitional security interests and/or interests with
minimal detail and third party right to challenge a listing
Further, when there is a listing against goods within the space the listing is often one that
has either:

migrated from a previously existing register (transitional), and the contact details
for the security holder are scant,
and/or

is so broad that it captures all items such as one relating to collateral class “All
present and after-acquired property - No exceptions”
Our members have found that security interests are often poorly recorded, providing
limited contact details for the interest holder. This is particularly the case where the
interest has been migrated from another register. This lack of detail makes it very
difficult for the facility operator to contact the security holder and discuss whether they
intend to claim or enforce their interest.
The general broadness of many listings is also debatable, particularly given the nature
and value of the items in storage. Other than trying to negotiate with the (often
uncooperative) registered security interest holder directly, there is no way of cost
effective way tp challenging the breadth of the listing or compelling clarification from
the interest holder as to the nature of the listing.
“…[often the] storage unit contains very little – maybe a small amount of furniture
or personal items of low or no commercial value (NCV). There would be a PPSR
listing in place for “any and all goods/belongings” often as part of a many year old
business transaction. We’ve been forced to find the financier and attempt to get
them to remove it…[in most cases] we’ve been successful by sharing the NCV
inventory and photos but it has unnecessarily delayed the process – usually
significantly.”
Our members have undertaken searches returning listings that are more than 15 years
old and are against ‘all present and after acquired property’. We have had one listing that
is more than 24 years old. Complex transitional listing rules aside, there appears to be no
automated sunset on listings, or indeed no need for an interest holder to reregister or
confirm their listing – the listing simply sits on the PPSR indefinitely.
Most small businesses – certainly most of our members – do not have the financial
resources to pursue legal avenues and dispute a listing.
1. Any listing that does not meet a set identification standard – full name and
current contact details or security interest holder – should be void.
2. There should be a means of requesting clarification or challenging broad
security interests, particularly when those interests are greater than 5 years
old.
3. A third party impacted by a listing has limited grounds and no affordable
means through which to challenge a listing. There should be an inexpensive
and swift process whereby a PPSR listing that is limited in identifying
information, more than a certain age, or very broad can be challenged and
the security interest holder must respond to the Register or the challenger
within a set period of time.
Specific concerns about cost and value – inconsistent listing practices by security
holders
Members have expressed concern about the cost of undertaking a search, particularly
where in almost all instances searches are usually taken with no positive result (no
listing is found). Further, members complain that the disclaimer on the certificate issued
clearly states that the information may not be correct. Where facility operators are
relying on the search to ensure they are not attempting to sell goods that are covered by
a security interest, the validity of the document should be absolute.
“The first time I did it, the fee was $3.50. The last time I did it, the fee was
over $20.00. Given that this is only 2 years old, that is a huge price increase
and there may come a time where we need to do this more frequently, thus
increasing costs further…My other issue is that there is a disclaimer on the
printed documentation that says it may not be correct – so I’m wondering
why we are paying such an amount to get information that at best, could be
a little vague.”
Other members have raised concerns about the value of doing the search given that
many relevant commercial industries do not know of the existence of the PPSR:
“I find it a waste of time and an additional cost that is highly likely not
going to be recovered. The PPSR website is a typical government web site
and complicated to use…I have spoken to rental businesses like radio
rentals… as they quite commonly call in regards to storer’s which are their
clients and may have goods of theirs in storage, These companies are the
most likely interested party with White goods, Electrical and Cabinets the
common goods stored in storage units and when asked about PPSR they
quite often don’t know it exists.”
1. In our industry, the cost relative to discovery of relevant information is too
high. Many storers default on very small storage fee amounts and for
storage of very low value item.
2. Further, the certificate should be absolute – our members should be entitled
to rely on the certificate, and the disclaimer should be removed.
Inconsistent listing practices and the question of perfecting possession
Perhaps of greater concern are instances where facility operators are contacted by
finance companies enquiring about whether or not a storer or particular goods are in
storage, yet no corresponding security interest is listed on the PPSR. On occasion this
has occurred after the facility operator has seized the goods to enforce their contractual
lien. The Association has had previous legal advice that when the facility operator seizes
goods in enforcement of its contractual lien, from that moment forward the facility
operator has a superior interest in the goods as against any subsequent PPSR
registration. However, the Association and in particular our small business facility
operators do not have the resources to take legal action when this position is challenged.
In one instance a facility operator was contacted by a finance company regarding an
item over which the finance company claimed they had an interest. The facility operator
noted verbally over the phone to the finance company that there was no listing against
that storer or that item on the PPSR. The finance company then registered their interest
and sent a copy of the PPSR listing through to the facility operator. Although it would
appear that the facility owner had priority as they had already taken possession of the
item by enforcing their contractual lien following default by the storer, like most small
businesses, this business did not have the resources to run a legislative interpretation
argument about priority and perfection of possession, and the finance company claimed
and removed the goods.
Where a PPSR listing is made by a finance company after they have made an enquiry to
the self storage facility operator, this is a clear attempt to inhibit the facility operator
from enforcing their contractual lien. A facility operator should be able to rely on a
search undertaken when it first seizes the goods and, where that search produces no
listening, enforced its contractual lien without needing to continually check for
subsequent responsive listings made after possession has been effected by the facility
operator.
Another member shared this experience:
“We had an instance where a vehicle was unencumbered (not listed on the PPSR).
The storer was well aware they were overdue. Two days after completing the PPSR
check with the all clear - Grays online were making preparations for the sale and
did their own check. It had been listed (we believe erroneously) to attempt to
prevent us moving to sale. In that instance we ended up doing a deal with the
storer.”
1. This is a problem with the constructed concept of ‘possession being perfected’.
Most small businesses do not have the resources to instigate legal proceedings
against an erroneous listing or to challenge the priority of a listing made after
the facility operator has taken possession of an item under a contractual lien.
Double charge – stability of website
We have had members complain about the stability of the website and the not infrequent
double charge incurred because the system has crashed before the search identification
has been recorded, causing the business to have to undertake and pay for another search.
“There have been times when the search has been completed twice and paid
for twice as the website has crashed before the certificate or reference
number has been produced. This means we are charged but do not receive
the information we have paid for. When followed up using the help line noone had a solution to this and we had to wear it.”
3. The website needs greater stability or a reimbursement capacity in the event
it crashes before the certificate or reference number is produced.
Motor Vehicles
Consistent with PPSA requirements, the Association advises facility operator members
to undertake a specific serial number and/or VIN search for cars, boats and aircraft in the
event that a storer defaults on their storage agreement and discovers these items are in
the space. The PPSR has been of great benefit to facility operators who previously had
to undertake searches across a number of registers to ascertain whether or not the item
was stolen or had any encumbrances.
However, a number of members have been ‘caught’ by lack of clarity in the PPSA. In a
number of instances vehicles in storage have had security interests registered against
them by finance companies that have not enforced their interest, but also refused to lift
the listing.
“… a vehicle financier…claimed their finance agreement was up to date and would
not cooperate.
i. After writing back and forth over several months (including continuing to try
and gain a response or payment from the storer) [the financier] continued to
refuse to remove the security on the PPSR.
ii. Eventually after 11 months (and the balance [on storage fees] had blown out
to >$5000 – (excess of the value of the vehicle) we began the process of getting
the PPSR removed.
iii. The only saving grace in this instance was that I checked the PPSR one last
time to discover they had recently removed it! We then proceeded immediately to
sale.”
1. In relation to motor vehicles, the consolidation of information from multiple
registers onto a single register is a fantastic accomplishment of the PPSA.
2. There needs to be a time limit for an interest holder to enforce the interest
or the interest should lose priority or become invalid (see below).
No time limit on security interest holder to claim or disclaim
Further, there is no time limit on the interest holder determining whether they intend to
enforce their security interest. Contrast this position with that under liquidation and
bankruptcy legislation for example. This has resulted in our facility operators being
forced to continue to store goods for which they are unable to accrue charges until such
time as the security interest holder decides to claim the item and enforce their interest.
We have members who have retained items for up to 12 months under these
circumstances (see above in particular re: cars).
“…we experienced a few frustrating issues with the PPSR mainly around non
response from those that listed the security on the register…Either we contacted
them and received no response…[or]…If we contacted them they may not
cooperate.”
1. There needs to be the ability to force a security interest holder to claim or
enforce their interest within a set period of time. If they fail to claim they
should be deemed to have relinquished their interest so the items may be
sold or disposed of.
Nature of items stored – exemption for self storage operators
In self storage, most items stored are household goods, and almost without exception the
goods are second hand. Under the PPSA specific exceptions apply to second hand goods
under $5000 in value. The Association would like to see an exemption for self storage
operators along the same lines as the one currently extended to pawnbrokers. Currently
pawnbrokers need not undertake a search of the PPSR unless they accept goods more
than $5000 in value.
Of all industries, pawnbrokers appears to be one where self storage has some parallel –
that is, where relatively low value goods are being left with a third person. Indeed, if
anything, pawnbrokers are in a stronger position than self storage facility operators as
pawnbrokers know what the goods are and have them consistently in their possession
from the moment they are deposited.
…[pawnbrokers] are indemnified and exempt from having to comply with
the PPSR which I have no idea why, but it would be great if we were too.
Member have pointed out the inconsistency in the legislation that affords protection to a
purchaser of second hand goods of a household nature under a market value of $5000,
whilst still requiring the self storage facility operator seller to undertake the search prior
to offering the goods for sale.
1. Self storage facility operators should be extended a similar exemption to
pawnbrokers under the PPSA whereby there is no need to undertake a PPSR
search prior to selling goods upon default of the storer where those goods are less
than $5000 in value.
2. Further, where goods are sold by a self storage operator upon default by the storer
and a security interest does exist over those goods sold, the purchaser should be
protected and enjoy unencumbered ownership as they currently do for other
second hand goods purchases.
We thank you for the opportunity to make submission on the impact the PPSA and PPSR have
on our small business members. We make this submission on behalf of our members, and rely
on their feedback for this purpose.
Regards
Simone Hill
Corporate Counsel
Unit 4 - 2 Enterprise Drive Bundoora Victoria 3083 Australia
Telephone: +61 3 9466 9699 • Facsimile: +61 3 9466 8081
Free Call Australia: 1800 067 313 • Free Call New Zealand: 0800 444 356
[email protected] • www.selfstorage.com.au • www.selfstorage.co.nz